Finance04 September, 20263 min read
Mohamed El-Erian Warns Global Government Bond Selloff Not Over, Cites U.S. Fiscal Consolidation
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Global government bond selloff will persist due to supply-demand imbalance in major markets. U.S. fiscal consolidation is unlikely soon, sustaining upward pressure on yields.
Bond selloff not over
Mohamed El-Erian told CNBC on Friday that the global government bond selloff is not over, warning that he does not see “any appetite in the U.S. for immediate fiscal consolidation.”
El-Erian, the Rene M. Kern Practice Professor at the University of Pennsylvania’s Wharton School and chief economic adviser at Allianz, said the pressure on yields is driven by a structural mismatch between bond issuance and “reliable buyers,” rather than inflation concerns or doubts about Federal Reserve credibility.
Quartz said the 10-year U.S. Treasury yield reached 4.788% on Tuesday, while the 10-year Japanese government bond yield crossed 3% for the first time since 1996 and the 10-year German Bund yield hit its highest point since 2011.
Quartz added that by Friday morning the selling pressure had eased and yields were broadly steady across developed markets.
In the same CNBC interview, El-Erian singled out the U.K., Japan, and France as the G7 economies he views as most exposed to sovereign debt stress, calling the U.K. a “high-beta country.”
Inflation alarm spreads
CNBC framed the bond sell-off as exposing investor anxiety that the macroeconomic backdrop may be shifting toward persistently higher inflation, with Emma Moriarty of CG Asset Management saying “Structural features of the global economy have shifted and now create inflationary, rather than disinflationary impulses.”
CNBC also quoted Jon Cunliffe, head of investment office at JM Finn, warning investors not to assume a return to the persistently low and stable inflation regime that prevailed between 2010 and 2020.
The CNBC report tied the yield spike to investor demands for a higher term premium amid greater fiscal borrowing requirements, persistent inflation uncertainty, and reduced central bank support for government debt in some major economies.
Quartz reported that El-Erian criticized the Trump administration’s attempts to influence bond markets and monetary policy, calling them “unfortunate.”
In the same Quartz account, El-Erian warned that “It’s a massive market. You cannot influence it in a very lasting manner unless you're willing to live with the unintended consequences and the collateral damage of doing so,” as yields across major sovereign debt markets moved to levels not seen in decades.
Mortgage rates and policy
The Realtor.com report said mortgage rates surged to a 2026 high of 6.71% for the week ending Sept. 3, after the global bond market was roiled by renewed inflation fears tied to hostilities in the Middle East.
“We cannot wait for uncertainties to resolve themselves before acting.”
Realtor.com quoted Sam Khater, Freddie Mac’s chief economist, saying “The 30-year fixed-rate mortgage averaged 6.71% this week,” and linked the rise to a 10-year Treasury yield climbing to its highest level since January 2025.
In the U.K., The Guardian reported that homeowners were braced for a jump in mortgage rates as UK swap rates used to price mortgages rose to a three-year high, with the five-year swap rate rising above 4.52% this week.
The Guardian quoted Coventry Building Society as raising rates across its entire range of fixed-rate mortgages for new and existing residential and buy-to-let borrowers, while noting that markets were not expecting the Bank of England to raise interest rates at its policy meeting later this month.
The Guardian also quoted Bank of England chief economist Huw Pill in Edinburgh saying, “We cannot wait for uncertainties to resolve themselves before acting,” as it described how bond-market turmoil could feed into mortgage pricing through higher gilt yields.